By: Staff Writer
October 06, Colombo (LNW): Sri Lanka is increasingly turning to Public-Private Partnerships (PPPs) to rebuild its crumbling infrastructure and attract foreign investment. Yet, beneath the celebratory rhetoric lies a dangerous undercurrent, a legacy of opaque deals, cost overruns, and hidden fiscal burdens that threaten to undermine the very recovery PPPs are meant to fuel.
The Finance Ministry’s Fiscal Strategy Statement 2026 openly concedes that PPPs pose “significant fiscal risks,” especially when governments extend guarantees or assume contingent liabilities.
When such projects underperform or fail, the financial fallout often lands squarely on taxpayers a pattern analysts warn Sri Lanka can no longer afford amid its fragile post-crisis recovery.
Successive governments have pinned hopes on PPPs across key sectors such as energy, ports, and water management. However, many projects have been bogged down by renegotiations, cost escalations, and an absence of central oversight. The result is a patchwork of ventures plagued by opacity and inconsistency.
The energy sector remains the most striking example. Two 350 MW LNG power plants in Kerawalapitiya essential for energy security have already incurred an additional US$ 73 million due to contractual revisions.
Similarly, the 50 MW Trincomalee solar project, backed by a sovereign guarantee, remains incomplete, with half of the Ceylon Electricity Board’s equity still pending.
Meanwhile, large-scale solar ventures in Poonakary, Siyambalanduwa, and Hambantota are progressing with private backing. Yet, experts caution that without robust fiscal safeguards, these deals could leave the Treasury exposed to new debt obligations.
Infrastructure partnerships tell a similar story. The US$ 700 million West Container Terminal-I at Colombo Port is finally operational, but other initiatives have stalled.
The proposed US$ 4.2 billion Galle Port remains mired in procurement delays, while the US$ 150 million South Asia Logistics Hub only recently secured a tender. Analysts say bureaucratic inertia and investor uncertainty continue to erode momentum.
In water management, the Rs. 3.3 billion Non-Revenue Water reduction project in Galle aims to reduce losses by 2025 through private participation. Yet, officials warn that poor contract design or performance failures could trigger costly compensation claims.
Despite the growing fiscal exposure, Sri Lanka lacks a central PPP registry or independent monitoring body. Past unsolicited proposals and hidden guarantees have burdened the Treasury with undisclosed liabilities. In response, the Finance Ministry is preparing a PPP Bill that will establish a National PPP Agency, enforce competitive bidding, and create a contingent liabilities register.
While PPPs may be one of Sri Lanka’s few remaining tools to fund infrastructure amid borrowing limits, weak oversight and political meddling could transform them from a growth catalyst into what officials now describe as a looming “fiscal time bomb.”
